The Kenya Revenue Authority (KRA) has declared, through a notice, that insurance relief, which is provided under the Income Tax Act, does not apply to contributions made to the Social Health Insurance Fund (SHIF) under the Social Health Insurance Act, a move set to affect employers and taxpayers in general.
The Income Tax Act had provided insurance relief for health policies whose terms commenced on or after January 1, 2007, or for contributions made to the NHIF. However, with the repeal of the National Health Insurance Fund Act by the Social Health Insurance Act, the landscape seems to have now changed.
This move contradicts a notice by the Social Health Authority (SHA), a month ago, which stated that contributors to the SHIF should qualify for insurance relief. With this new directive unfavorable for most contributors, the government looks to offer hope in terms of the proposed Tax Laws (Amendment) Bill, 2024.
Through the bill, the government proposes an amendment to the law that would provide for a deduction of SHIF contributions against taxable income.
This discrepancy highlights a lack of clear communication between different government agencies. It is crucial for employers to ensure they are making the correct deductions and submissions, while employees should ensure they are aware of how these contributions affect their overall tax situation.
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